AppLovin (NASDAQ:APP), a leading mobile app monetization software platform, has decided to abandon its $17.5 billion proposal to acquire Unity Software (NYSE:U). Unity is a software platform that helps in creating and operating interactive, real-time 3D content. On Monday, AppLovin announced that it will not submit another proposal to acquire Unity. It also withdrew its initial offer made in early August.
AppLovin shares advanced 3.1% in the extended trading session on Monday, while Unity stock fell 2.4%.
What Went Wrong with the Proposed AppLovin-Unity Merger?
On August 9, AppLovin made an unsolicited offer to acquire Unity for $58.85 per share, reflecting a premium of nearly 18% to the previous day’s closing price. AppLovin felt that the combined entity would provide an “unprecedented full stack solution for developers to create, monetize, measure and grow games.”
However, in mid-August, Unity rejected AppLovin’s offer, stating that the proposed deal was not in the best interests of its shareholders. Further, Unity recommended its shareholders vote in favor of the $4.4 billion merger agreement with AppLovin’s rival ironSource (IS) that was announced in July.
AppLovin now believes that its path as an independent company is better for its shareholders. The company expects enhancements to its core technology to drive its long-term growth. It also sees the opportunity to expand its total addressable market, with growth in categories like connected TV.
Meanwhile, last week, Unity announced a special meeting of stockholders on October 7 to vote on its merger with ironSource.
Is AppLovin Stock a Buy?
Last month, Wolfe Research analyst Gal Munda initiated coverage of AppLovin stock with a Buy rating and a price target of $40. Munda believes that AppLovin has “many strategic options” ahead of it. In reaction to Unity’s rejection of AppLovin’s offer, the analyst opined that the company’s failed bid for Unity should not deter investors from a “high-quality name” as AppLovin is capable of being “successful on its own.”
Overall, AppLovin scores the Street’s Strong Buy consensus rating based on 13 unanimous Buys. The average APP price target of $60.23 implies 111.3% upside potential from current levels. Shares are down nearly 70% year-to-date.
AppLovin has now withdrawn its plan to acquire Unity Software after the latter rejected its offer last month. The management, as well as Wall Street analysts, believes in AppLovin’s ability to grow further as a stand-alone company.